BT hangs on to its £4bn but rings in a divi hike

BRITISH TELECOM dealt a blow to windfall-seeking investors by holding on to the £4bn it made by selling a stake in US group MCI.

Chief executive Sir Peter Bonfield says his priority is to plough £4bn a year into networks and overseas investments.

He does not rule out returning some cash at a later stage. Meantime, he has at least boosted the interim dividend 7.3pc to 8.1p. Last time it rose 6.2pc.

BT shares sank 35p to 808p. Bonfield admits that cost-conscious consumers are spending less. 'We are starting to see the slowdown. We don't think it will be a bloodbath.' Inland call volumes rose 6pc on an annualised basis, compared to 8pc last year.

Luckily BT lost only 65,000 customers to rivals in the half, against 230,000 last time. Fast growth from Internet services and 60pc-owned mobile phone group Cellnet helped interim operating profits to rise 6pc.

A £1.1bn profit from the MCI sale saw pre-tax profits leap by two-thirds to £2.6bn.

Bonfield says the new alliance with US giant AT&T will be profitable in year one.

Concert, the vehicle they will use to win corporate customers, has already reached £1bn annual sales.

Losses on European ventures, including a stake in French operator Cegetel, are running at £300m annually.

Broker SG Securities forecasts slightly lower full-year BT profits of £3.3bn, worth 33p a share. BT is not cheap, but its strong position in high-growth markets makes it worth holding.